Simplified issue vs guaranteed issue life insurance

Simplified issue life insurance skips the medical exam but asks a short list of health questions, and the insurer can decline you based on your answers and records. Guaranteed issue life insurance asks no health questions and cannot turn you down within its eligible ages, but it usually has a graded benefit: if you die of natural causes in the first two years, your beneficiaries typically get back the premiums paid plus interest rather than the full death benefit. As a rule, the fewer questions a policy asks, the more it costs per dollar of coverage, so try fully underwritten or simplified issue first.

Three ways to qualify for life insurance

How simplified issue works

A simplified issue application asks questions about recent diagnoses, treatment and hospital stays. There is no exam, but the insurer usually checks prescription history and other records, and answers must be complete and truthful.

It suits people with health conditions that are well controlled and stable. Someone whose treatment and medications have not changed in the last couple of years can often qualify, while recent surgery or a new diagnosis may lead to a decline. Simplified issue can be term or permanent, and decisions are often quick.

Coverage amounts on simplified issue policies are usually lower than on fully underwritten policies, though often enough for final expenses, a modest mortgage balance or a gift to family. Insurers set their own maximums, which can differ by age.

How guaranteed issue works

Guaranteed issue policies accept everyone in the eligible age range, usually older adults, regardless of health. They are typically small whole life policies meant to cover a funeral and final bills.

Because the insurer does not know anything about your health, it protects itself with a graded or waiting period benefit. If death from natural causes happens in the first two years, the policy typically refunds the premiums paid plus a stated amount of interest. Accidental death is usually covered in full from the start. After the waiting period, the full death benefit applies.

Guaranteed issue coverage amounts are usually modest, intended for final expenses rather than income replacement. Ages are limited, often to older adults within a range the insurer sets. If you buy one, make sure your beneficiaries know about the waiting period and keep the policy documents where they can find them.

Which one to try first

A good independent agent can often predict which route you will qualify for before you apply, because carriers treat the same condition differently. Applying to the wrong carrier and getting declined is a step you can usually avoid.

If you have been declined before, do not assume you will be declined everywhere. Underwriting guidelines differ widely between insurers, and a condition that is a firm no at one company may be acceptable at another, especially when it has been stable for some time.

• Start with fully underwritten coverage if your health is good; it is usually the lowest price.
• Move to simplified issue if you have conditions that are stable and well managed.
• Use guaranteed issue as the last resort, when other options decline you, and make sure your family understands the waiting period.

Final expense: where these policies are most common

Final expense insurance is usually a small simplified issue or guaranteed issue whole life policy. It is designed to pay for a funeral, medical bills and the last costs of an estate, so a family is not left scrambling. Premiums are typically level and the coverage is designed to last for life, subject to the policy terms.

When you compare final expense policies, compare the face amount, the monthly premium, whether the premium and death benefit are level for life, whether the benefit is graded, and what happens if you miss a payment. Paying for a few years and then letting the policy lapse is the most expensive outcome of all.

Arizona protections

Every policy sold in Arizona must come from an insurer licensed by the Arizona Department of Insurance and Financial Institutions, and every policy has a free look period, printed on the policy, during which you can return it for a refund. Be wary of anyone pressing you to decide on the spot.

Guaranteed issue and final expense policies are often marketed heavily on television and by mail. Before you respond to an advertisement, compare it with what you might qualify for elsewhere. A licensed, independent agent can show you several carriers side by side, and you are never obligated to buy.

If you ever have a concern about a policy or the way it was sold, the Department can take a complaint, and you can verify that an agent holds an active Arizona license.

What insurers look at besides your answers

Even without an exam, a simplified issue insurer usually checks other records with your permission. That can include prescription history databases, the Medical Information Bureau, motor vehicle records and sometimes a short phone interview. That is why the health questions must be answered carefully and completely.

Common conditions such as controlled high blood pressure, cholesterol managed with medication, or type 2 diabetes without complications often still qualify for simplified issue coverage, depending on the carrier. Recent cancer treatment, a recent heart attack or stroke, or a terminal diagnosis usually point to guaranteed issue. Every carrier draws these lines differently, which is the strongest argument for working with an independent agent who can compare several.

Be ready with a list of your medications, doses and the dates of any surgeries or hospital stays. Accurate details make the application faster and help avoid problems later.

A Sun Lakes example

Consider a 72 year old in Sun Lakes who had a heart stent placed four years ago, has been stable since, and has not changed medications in two years. A guaranteed issue policy would accept her, but with a two year graded benefit and a higher cost. Several simplified issue carriers may accept her instead, with full coverage from the first day and a lower premium, because her condition has been stable.

Now consider a neighbor who is in active cancer treatment. Simplified issue applications will likely decline him for now, so a guaranteed issue policy, with its waiting period, may be the right way to make sure his family has something in place. The key is knowing which door to knock on first.

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The bottom line

No exam does not have to mean overpaying. Visit our Final Expense Insurance page, then let Viola or Jacob look at your health history and match you to the right type of policy and carrier before you apply. Every policy is subject to the insurer's underwriting and terms.